Hans Hendrischke

Framing China: Transformation and Institutional Change Through Co-Evolution

This paper proposes a new institutional perspective to explain not only the diversity of local business systems in China but also how this diversity results from the integration of major institutional forces. We model the emergence of Chinas business systems as a co-evolutionary process unfolding along a business-government and a micro-macro-level dimension structured by intergovernmental institutional competition, business to business and business to government networking and public-private corporate governance. We find that: (i) Chinas emerging business system is the result of local institutional competition at the micro level that reduces the need for national (macro) institutions and impacts on the local implementation of national (including supranational) policies; (ii) the interaction between government and business is structured through networks which operate according to an economic rationale while drawing on cultural norms and traditions; and (iii) local businesses interact with local governments to recombine productive factors and reorganise firms and industries in line with local institutions. We conclude that the astonishing adaptability of Chinese businesses as well as the risk of corruption and lack of formal control at local government level are elements of locally differentiated business systems which are held together by an overarching institutional architecture.

China incorporated: property rights, networks, and the emergence of a private business sector in China

Based on fieldwork in Zhejiang 2000/01, the paper analyses the processes and mechanisms that shape China’s new private sector. The paper argues that the development of the private sector is characterised by the on‐going interaction between local jurisdictions, networks and entrepreneurs. The search for and protection of private property rights can be singled out as the most crucial factor for explaining the establishment and organisational form of firms. The empirical study can also help to explain why the family is no longer at the core of private firms, offering too small a resource base, and too little access to asset protecting networks.